Test results

The system was backtested on hourly bars in eurocurrency futures from June 1, 2004 to March 31, 2007. Commissions and slippage of $25 per round-trip trade were included. Table 3 lists test results for each rule and the combined strategy. Overall, the system gained $40,612.50 in one contract in the past three years, and each rule was profitable, meaning you could modify the approach to fit your schedule. However, the best-performing trade occurred at 11 a.m. ET as European trading wound down — a time period often overlooked by many traders.

Buying euro futures at 11 a.m. and holding the trade until 3 p.m. generated 42 percent of all gains ($17,187.50) and an average trade of $26.90. But that signal had the largest drawdown ($4,712.50), and only 50 percent of trades were winners. Although the third rule — selling short at 5 a.m. and exiting by 7 a.m. — wasn’t as profitable, it had a smaller drawdown ($2,950), the second-highest average trade ($23.50), and the largest profit factor (1.35). The first and second periods generated weaker performance, but they also traded less.